will open a $1 billion coal and petroleum coke unit at an existing power plant north of Alexandria that the company says will reduce and stabilize customer bills, but environmentalists say is proof of Louisiana's unhealthy reliance on dirty fuels.

In late December, Cleco is expected to fire up Rodemacher 3, a 600-megawatt plant that will burn solid fuels such as petroleum coke, a refinery byproduct that is cheap and abundant in Louisiana.

"This is a big day for us," said Dilek Samil, president and chief operating officer of Cleco Power LLC. "We wanted to provide stable and reasonable prices to our customers."

The $1 billion plant marks a significant achievement for the Pineville utility, which had a market capitalization of about $1 billion when it began work on the project. In embarking on the project, the company got lucky, because it locked in a price with its contractor, the Shaw Group, just before labor and materials prices went haywire after Hurricane Katrina and contractors stopped offering fixed price contracts.

Cleco made the investment to try to diversify its fuel sources to protect customers. Until now, 70 percent of Cleco's power has been generated from natural gas, which is very volatile in price. When Rodemacher opens, 70 percent of Cleco's power will be generated from solid fuel sources. The extra capacity will also give Cleco the flexibility to switch between fuel sources if prices soar.

On Wednesday, the Louisiana Public Service Commission approved higher rates for Cleco's 276,000 customers to recover the cost of building the plant, but customers are expected to see a net decrease in their bills of about $40 million each year because of lower fuel costs. The new rates will take effect when the plant commences operation, probably in late December or early next year, and residential bills should drop by about three percent.

Cleco provides power to St. Tammany Parish, where customers have long complained that they pay the highest fuel clause adjustments in the New Orleans area. Public Service Commissioners said Rodemacher will be an asset to Cleco's customers.

"It's important that we show the state that we're committed to the diversification of fuel," Commission Chairman Lambert Boissiere III said, referring to last year's spike in natural gas prices that left many Louisiana consumers unable to pay their power bills. "This at least gives some stability to rate-payers."

Cleco's plant will open at a time when fewer and fewer solid fuel projects are moving forward because of increasing environmental concerns and challenges in financing the projects. The Edison Electric Institute trade group said only 41 coal-fired units had obtained permits or were under construction around the country in August 2009.

Still, building new coal plants is about to get a lot tougher, and Cleco may have gotten in just under the wire. On Oct. 1, the U.S. Environmental Protection Agency announced that it plans to begin regulating emissions linked to climate change from new industrial facilities. Because Cleco's plant has all of its permits, has been constructed and is currently undergoing testing, it is considered an existing facility.

Jordan Macha, a conservation organizer with the Sierra Club, said that Cleco isn't doing its customers or the state any favors. Cleco won PSC approval for the plant in February 2006 when environmental groups were too preoccupied with Hurricane Katrina to mount much of a stink.

"This type of plant really shouldn't have gotten through so easily. They were able to get this through in 2006 without a whole lot of people looking closely enough at what they were doing," she said, noting that coal plants emit huge amounts of mercury, and there are already 48 mercury and fish advisories in Louisiana.

In the spring, Entergy Louisiana LLCput plans on hold to retrofit a unit of an aging natural gas plant in St. Charles Parish, Little Gypsy, to burn coal and petroleum coke because of changing economics and uncertainty over environmental regulations.

Cleco says Rodemacher 3 could actually provide a pathway to the future because the plant is capable of burning biomass. The company is investigating what sorts of plant matter fuel sources are available within 50 miles from the plant, such as scraps from the timber industry.

If Congress mandates that utilities generate a certain portion of their power from renewable energy sources, Cleco says Rodemacher will make it easy to comply.

Macha said she hopes Cleco will take advantage of that opportunity. "I really hope that Cleco makes a responsible decision to use renewable resources such as biomass to power this plant."

Rebecca Mowbray can be reached at rmowbray@timespicayune.com or 504.826.3417.